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HomeFinance and InvestmentHere’s What You Need to Know About Investing in Equities

Here’s What You Need to Know About Investing in Equities

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Investing is a tried-and-true approach to making your money work for you now, for earning more of it in the future. In a way, it is a transfer of purchasing power now to others with the rational expectation of having more purchasing power later. According to Warren Buffet,

“Investing is forgoing consumption now in order to have the ability to consume more at a later date.”

If you make regular investments, you can increase your wealth, earning more returns over time. It is essential to save money and start investing in equities because the stock market is a great platform to begin your investment journey.

What are equities?

Equities are similar to stocks, which are, in turn, shares in a company. Investing in stocks entails investing in equities, which indicates that you are a shareholder or partial owner of the company’s stock. Equities do not give guaranteed income because they do not pay fixed interest. Market risks have a direct impact on equities.

Why should you invest in equities?

Investing in equities or stocks is based on assumptions. Investors buy shares with the expectation of seeing an increase in share value to earn returns in the form of capital appreciation and capital dividends. If the share price rises, investors will profit financially when they sell their shares. Equities add diversification to a portfolio, improving its asset allocation.

Equities, expressed in shares, are traded on the stock exchange, like Singapore Exchange (SGX). The Straits Times Index (STI), which monitors the performance of the top 30 SGX-listed companies in terms of market capitalization, serves as a significant benchmark for the Singapore market.

Depending on the market, an investor can purchase or sell shares. Some markets may permit investors to own single shares, but the smallest transaction size in Singapore is normally in board lots of 100 shares.

Various benefits of investing in equities

Equities, like any investment, have some advantages that draw investors to invest in them. Most investors like equities to be a part of their portfolios for reasons ranging from easy accessibility to high return potential. Here are some prime benefits that investors look for in equity investments.

  • High rewards potential

Perhaps, one of the greatest advantages of direct equity investment through stocks is their potential for high returns. You can make significant gains by making the right choice. Selecting the right stocks and selling them at the right time is essential for successful equity investments.

  • Diversification

You can diversify your portfolio by investing in several equities and stocks from multiple industries through exchange-traded funds (ETFs), mutual funds, and index funds.

You can select from a wide range of equities for direct equity investment. Choose the option you believe has good potential to help you with long-term wealth creation and maximum growth. Further, investing in the equities of a small-cap, mid-cap, or large-cap company is based on your risk appetite.

  • Dividends

There are some equity investments that generate dividends from capital gains, which the company pays to shareholders from the profits. When the business does well under favourable market conditions, the stock value increases, which generates income.

  • Accessibility

Equity investments and the rewards that go along with them are easy to access because they can be made through many different avenues.

  • Ownership

A shareholder becomes a part of the company by making an equity investment. In essence, shareholders acquire partial ownership of the business and some privileges too. They are entitled to a portion of the profits made by the business. Additionally, they have the right to vote in the company. 

Equities are the preferred asset type if you have a high-risk tolerance and an aggressive attitude. Investing in equities ensures that you can easily achieve your long-term goals by building sufficient funds.

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